The 5 Step Guide to Start Your Consulting Business
Market your expertise to start your side hustle and get in on the gig economy
Have you been dreaming about starting your consulting business? In today’s gig-based economy you’ve probably considered ways to turn your experience and expertise into a side job to bring in extra income. It’s a smart move not only to boost your earnings, but also by maintaining a roster of clients and projects that will expand your knowledge base within your industry and keep you networked and connected to potential new opportunities if your day job goes south.
Let’s explore how to turn your dream of starting your consulting business on the side, into a reality.
1. Figure Out Your Niche for Your Consulting Business
What skills and expertise do you have that others need? If you’ve been working for several years, you probably have a few different skill sets that you could market, but to get started you’ll want to hone in on three or four skills that are in high demand or that lend themselves easier to a consulting role. Use this initial list to create your list of initial offerings as you start your consulting businesses. Be sure to explore what kinds of roles companies are hiring for to further hone in on your one or two core initial offerings.
2. Do Your Research: Skills and Rates
Figure out what consulting projects look like in your field of expertise. Use sites like Upwork, Fiverr, and Freelancer to browse job postings. Look for types of companies that tend to look for freelancers with your expertise. Review the rates being offered and skillsets of fellow consultants so you can better understand how to brand and market yourself. Use the data from the various job postings to set a rate range for yourself, depending on how much experience you have.
Then, check your rate range against what a full-time, salaried position would pay for the same role and level of experience, and adjust for the fact that consultant rates are usually higher than salaried positions because consultants don’t receive benefits and don’t have a steady flow of hours. Once you’ve figured out your core offerings and your pricing, you’re almost ready to start your consulting business.
3. Establish Your Brand and Identity.
Establishing your brand and identity could be as simple as updating your LinkedIn and other relevant social media profiles with your latest and greatest achievements.
Or, it can be as extensive as creating a dedicated website for yourself. This would be where you could highlight and display your work and connect with potential clients. Keep the content easy-to-digest and focused on building the story of how you have a proven history of achieving results. Create a few case studies or examples of your work, with names and data redacted where necessary, to have on hand to share with potential clients of your new consulting business.
4. Find Clients for Your Consulting Business
Use your personal network and freelancing sites to get your first few clients. First, reach out directly to personal contacts and ask them if you can use them as a reference in the launch of your consulting business. Explain that you’re picking up a few select clients as a side hustle and remind them of projects you may have successfully worked on together. Don’t feel shy to ask them directly if they or anyone they know may be able to use your expertise. You are providing companies with real value. You’ll come in and help clients solve important issues they’re facing. So let go of the feeling that you’re “selling” yourself and instead focus on how you’re “helping” companies grow and succeed.
Once you tap out of personal contacts, start responding to job requests on the freelance sites mentioned above. Look for projects that you can complete successfully and efficiently so that you can build up your credibility and reviews on the sites. Once you get a few projects under your belt you can start expanding your sourcing base.
Go on job sites like Indeed or LinkedIn and look for companies that are hiring people with the skillset you’re offering, either full-time or part-time. In some cases, you may be able to fulfill the job requirements on a consulting basis! This would be a win/win for you and the employer as they will save on the time and resources of hiring a full-time employee while getting their needs met with your unique expertise. This technique works best at smaller companies and startups who run on leaner budgets and would be more amenable to outside-the-box solutions to their hiring needs.
5. Get Your Back-Office In Order
Sometimes getting your back-office in order can be the most intimidating part of starting your consulting business. You’ll have to file for the appropriate licenses, figure out how you’ll handle your taxes and familiarize yourself with other responsibilities that come with launching your own business.
Tap into resources built specifically for consultants like Liquid. Liquid helps consultants stay organized through free tools that enable you to organize, communicate, and track details (including hours spent) of active projects in one central place. Once you’re ready to bill your client, Liquid pulls together your hours, the details behind the hours and creates a full invoice that you can send off easily to clients.
Other back-office details you’ll want to consider include obtaining an EIN (Employer Identification Number) and how you will manage your taxes. While sole proprietors (i.e.: individual freelancers) are not required to obtain a federal tax ID or EIN, you may want to consider obtaining one anyway so that you can use it to complete business paperwork (allowing you to keep your personal social security number private). If you hire workers down the road then you will need an EIN to file taxes appropriately.
Most states and counties require a home business license if you do any work from home. It provides revenue to the local government and notifies authorities about your activities. Check with your local government on how to obtain your license.
If you are doing business under a name other than your own, your city or state will require you to file a DBA (‘Doing Business As’) application. The U.S. Small Business Administration website can help guide you on the licenses and permits you may need.
As a side hustler or freelancer, you have two options for managing your taxes: submitting estimated or quarterly taxes or adjusting your W-2 withholdings. If you expect to owe at least $1,000 in freelance income taxes, or if you make more than about $15,000 a year from your side gig, you should consider filing your estimated taxes quarterly. To figure out what you owe, estimate what you think you’ll make for the year, apply your tax rate and then send in four payments throughout the year to the IRS (check the IRS website for quarterly filing dates).
If you still have a full-time job you can skip quarterly payments and just adjust your W-2 withholdings with your employer. Calculate how much you owe in taxes for your side gig, divide that number by the number of paychecks you get in the year and fill out a new W-2 where you withhold extra amounts of your income for federal and state taxes, eliminating the need for estimated taxes.
As always, refer to the IRS website for more insight or ask your tax advisor.
While getting your consulting business off the ground the right way may be more time-consuming than you originally thought, you can make it well worth the effort. Starting your consulting business can lead to new opportunities for growth in both your professional and personal life. It will keep you active and current in your professional field, and potentially give you a new revenue stream.
Good luck on forging your path ahead! Your new consulting business is waiting for you.
Category: Freelancer Tips
Updated: October 30, 2019
Quick note: This is not to be taken as tax advice or legal advice. Since tax rules and laws change over time and can vary by location and industry, consult a CPA / tax advisor and/or attorney for specific guidance.